Inside Philanthropy

August 29, 2011

Fundraising needs to change

The charitable marketplace is undergoing dramatic change, a transformation that demands nonprofits change the way they raise money.

Driving the change are the deeply troubled economy, sweeping shifts in the makeup of the population, rapid technological advance, and radically different ideas among donors about giving and getting involved.

As a result of those converging forces, nonprofits face higher operating costs and demand for services, rising anxiety and expectations among donors, and critical choices about how to be more strategic and innovative in the way they do business.

So rethinking the way they raise money is critical for their survival.

Nonprofits traditionally have treated fundraising as a business transaction that involves matching donor supply with charitable demand.

They have viewed a gift as a transaction, the end-product of a sales cycle that includes research on donors, calling on them, cultivating them, asking them for a gift, then thanking them and “stewarding” them for the next gift.

In recent years, that approach has included a greater focus on the donors themselves, on knowing more about them than just the facts of their assets and interests, and on engaging them in the work of the nonprofit.

But in the new charitable marketplace, nonprofits need to do a lot more.

Donors want and expect more than transactions in which they simply dispense funds in response to a request from a nonprofit to meet its needs.

And they want to be more than simply the object of pandering.

They now want to get involved, truly involved, to make a difference, to have an impact that is “transformational, not transactional.”

So nonprofits need to shift the focus of their charitable brokering by truly getting to know donors and helping them understand their community, the role the nonprofits play, and the impact a gift can have in helping the nonprofit address urgent community needs.

Nonprofits need to help donors see that making a gift will help fix a community problem they care about and get them more involved in making sure their investment makes a difference.

That new approach, in which donors become investing and participating partners of the nonprofit rather than simply its absentee underwriters, applies whether the donor is an individual, a foundation or a corporation.

It also requires that nonprofits become more innovative and strategic in the way they use technology.

That means making sure they use their websites, email, social media and mobile devices to tell a clear and simple story about who they are and the impact they have, to reach the audience they want to reach, and to prompt that audience to take some kind of action, such as becoming a member of the nonprofit, making a donation or advocating for a cause.

A growing number of nonprofit leaders and experts are calling for charities to make a big shift in their fundraising role from simply securing gifts to “enabling” philanthropy, helping donors see the interests and aspirations they share with nonprofits, and forming partnerships in which donors become investors who participate in the change they want to see.

At a recent fundraising conference in North Carolina, Andrew Watt, the new president and CEO of the Association of Fundraising Professionals, said fundraisers should serve as a “gateway” for philanthropy, while Tammy Zonker, who last year secured a $27.1 million gift from GM to United Way for Southeastern Michigan to help transform low-performing schools, said fundraisers should be a “conduit” between people with resources and people in need.

Adrian Sargeant, who recently began a two-year break from his job as an endowed fundraising professor at the Center on Philanthropy at Indiana University, says donor “identity” is becoming a critical element of fundraising.

So fundraisers need to understand what donors say about themselves when they make a gift, and how they identify with the nonprofit they support, so the nonprofit can raise more money while helping donors feel better about themselves.

And Karla Williams, a national fundraising consultant based in Charlotte, N.C., who is director of the Leadership Gift School, a local effort to build the fundraising capacity of nonprofits in the region, says fundraisers need to create a “culture of philanthropy” in their organizations and communities that helps donors see that supporting a particular organization gets them involved in helping to address community problems they care about.

Nonprofits are heroes in our society because, despite escalating and seemingly overwhelming odds, they continue to strive to learn, lead and grow so they can better help people and places in need.

By better understanding donors and enlisting them in the job of improving our communities, nonprofits can be more effective as organizations and as a strategic force for good.

August 22, 2011

In crippled economy, asking is believing

With the second wave of a “double-dip” recession looming, nonprofits cannot afford not to be asking for money -- continually, vigorously and methodically.

Indeed, particularly in the face of the current economic gloom and doom, asking reflects the promise of hope and should flow from a vision of growth and change that is essential for nonprofits if they expect to engage donors in addressing community problems they care about.

That is the message of Eileen Heisman, president and CEO of the National Philanthropic Trust.

The Trust, a national public charity that functions a lot like a community foundation, reached a big milestone recently, for the first time exceeding $1 billion in assets under management.

Launched in 1996, the Trust has raised $2.5 billion and given away nearly $1.5 billion.

And the fiscal year ended June 30, contributions to donor-advised funds at the Trust grew $197 million to a total of $418 million, compared to growth of $36 million to a total of $221 million a year earlier.

The key to raising money in a tough economy, Heisman says, is to keep in touch with donors, make a clear and compelling case for support, enlist at least a third of the board to cultivate prospects, and make sure the executive director devotes at least a fourth of her or his time to fundraising.

“Whenever the economy falters, people get nervous,” she says. “Donors get nervous and fundraisers get nervous, too. People are reluctant to part with money when the economy is not stable.”

So fundraisers must keep everyone’s eye on what is possible, she says.

“If donors are nervous, fundraisers have to be persistent and creative to keep the money coming in,” she says.

Inexperienced fundraisers, in contrast, tend in a sinking economy to act as if “the sky is falling,” Heisman says.

“So they sit in the office and get paralyzed, or get told by the CEO or the board that they should not ask,” she says. “And the worst thing a fundraiser can do is to stop asking.”

When financial markets dive, “you have to keep asking and talking to people and making the case and keeping the cause in front of donors,” Heisman says. “Unless you’re in front, talking to donors about your organization and what you’re doing to make the world a better place, donors may forget you.”

Communicating is a fundamental job for fundraisers, not only with donors, but also with their staff and board, Heisman says.

“Fundraisers’ job is to translate program needs to donors,” she says.

So fundraisers should be talking to donors about the organization’s programs and general operations, inviting them to breakfast or lunch with a board member or the CEO, and inviting them to see a program the organization delivers on the front lines, while continuing to generate direct-mail and other solicitations that are part of the nonprofit’s normal fundraising program.

Fundraisers also should be vigilant about thanking donors, letting them know how their funds are being used, and treating each gift as “cultivation for the next gift.”

It also is essential that fundraisers work internally, with their executive director, board and staff, to develop a clear “case statement, an ‘elevator speech,’ that explains to donors what’s going on,” Heisman says.

Fundraisers need to “create a climate” for that internal discussion and “build consensus about what to say.”

In fact, she says, fundraisers should be feeding into that discussion the feedback they get from donors about the organization’s strengths and weaknesses.

Fundraising primarily is a staff function, Heisman says, and executive directors should be spending at least 25 percent to 30 percent of their time each week on donors and development.

“If you don’t, it’s going to be really hard to keep the place afloat,” she says. “You can’t lose the connection to your donors, and that takes time and effort, and you have to be thoughtful.”

A good board, she says, can supplement the executive director’s job in development but cannot replace it.

A key board role is to help cultivate donors, Heisman says, and the executive director must make sure the board knows its role, tell board members which donors and prospects they need to work with and what they need to do, including the message they need to deliver and the cheerleader they need to be.

Most board members, however, may not be able to “close” gifts and likely will need staff help.

So if the executive director is not comfortable closing a gift, he or she needs to get some training in that skill.

“Boards need to understand what they can do,” Heisman says. “Sometimes boards are like deer in the headlights: They either don’t know what to do or are terrified.”

Development, she says, is a staff-driven activity.

“A board that’s doing their job will respond to staff direction and suggestions and ideas about what to do in development,” she says. ‘A board usually doesn’t initiate or create a development plan.”

The fundraising role of the executive director or development director is akin to that of the conductor of a musical group, with the board and other staff members functioning as the musicians.

“The person at the top with the baton is from the organization, not the board,” Heisman says.

Ultimately, she says, the job of fundraising is the responsibility of the executive director, who needs to be actively asking, particularly in difficult economic times.

“Nobody wakes up in the morning and says, ‘I’m going to make a gift to XYC organization,’” Heisman says. “You have to ask them, you have to ask them repeatedly, and you have to ask in all different ways.”

August 15, 2011

Tracking charity’s impact a big job

Throughout the charitable marketplace, metrics represent both good news and bad news for nonprofits.

The good news is that nonprofits are trying to get a better handle on their business and their impact, and measuring the results of their work can help them make decisions about what works, what does not work, and how they might retool their operations and programs.

The bad news is that many nonprofits are turning to metrics mainly because they are being bullied by foundations fixated on data and measurement for their own sake.

To make it worse, foundations often fail to use metrics to track their own impact, while also failing to provide funds nonprofits need to take on the added burden of handling measurement, including the job of gaining the expertise they need to gauge their impact and make effective use of the metrics the collect.

Data in fact can help nonprofits and foundations assess the job they are doing and serve as a guide as they think about how to make their programs more effective and their business model more sustainable.

A growing number of funders and nonprofits are embracing “evidence-based” programs, with funders agreeing to invest in nonprofits that develop or adopt programs shown to work based on data-tracking and evaluation standards built into their design.

That is good news indeed.

But as a recent survey by Sage North America shows, metric-based strategies often fall far short of their promise.

Just over half of 438 Sage customers in the U.S. and Canada who responded to an online survey in June said grantmakers are demanding more “impact measures” or “outcome measures” than they did two years ago, but only 17 percent of respondents are “very satisfied” with their own organizations’ grant-management processes.

Like it or not, nonprofits are going to have to learn to build metrics into the way they do business if they expect to make their case to funders.

And funders will need to move beyond just preaching the importance of measuring success and start to use metrics themselves in a meaningful way and to invest in nonprofits to help them use metrics in a way that helps them better serve people and places in need.

August 8, 2011

Nonprofit label for news can mislead

With the American newspaper industry on its deathbed, nonprofit news sites are sprouting.

They have received a lot of attention, often positive if not swooning, from media “experts” and from the news media itself, as well as funding from the philanthropic community.

Yet many of those sites are little more than propaganda mills with no kinship to the newspapers they claim to want to replace, lacking not only the breadth and depth of traditional newspaper journalism but also its quality and integrity.

Meanwhile, as they continue to post sinking revenue, lose print readers and lay off employees, few newspapers have provided serious or candid reporting on their own decline, with many continuing to whistle through the ward for the terminally ill, trying to convince their readers – or just themselves – that their vital signs remain robust.

What happened?

Once, newspapers were thriving and highly competitive sources of news and opinion, having historically functioned as such pillars of democracy that freedom of the press got its own constitutional protection.

But newspapers have dug their own graves.

Big newspaper chains, greedy for profits, gobbled up one another, taking on huge debt that has become an overwhelming financial burden in an economy on life-support and an information marketplace transformed by the web and digital technology.

And in the face of intense competition from broadcasters and the internet, newspapers were painfully slow to recognize they needed to treat their websites as products worthy of at least the same investment of resources and attention they devote to their print publications.

In their fierce battle for readers, newspapers also were shamefully quick, like their rival local broadcasters, to pander to the voyeuristic tastes of readers for sex and violence, sensationalizing the latest trashy scandal, murder trial or tragic car crash instead of reporting on the fundamental and urgent community issues that once were their heart and soul.

Why should we care?

Newspapers back in the day were the civic glue that helped hold our communities together.

Regardless of the politics of its owner or editorial page, a local newspaper served as a kind of public square where members of a community gathered to trade news, information and gossip.

Readers could turn to their local paper for reliable, trustworthy news about their government and schools, business and sports, and civic and social goings-on.

Unlike today’s sprawling and fragmented information marketplace, newspapers served as a central source of news that gave readers a common point of reference fundamental to the civic health of a community.

Newspapers, in short, played an indispensable role in a society in which we aspire to govern ourselves and need a trusted source of news to help us make informed decisions about who to vote for, where to shop, and how to spend our free time.

Where will we get news?

Americans increasingly are turning to the web, a seemingly endless digital mosaic where news can be found at untold numbers of sites that typically are highly specialized in their focus, often through the filter of a particular ideology or perspective.

At least part of the void created by the demise of newspapers already is being filled by nonprofit news sites that, sadly, often deliver a lot less than they promise.

Digital-media and news-media insiders, and the charitable foundations that fund nonprofit news sites, have cranked out a lot of self-congratulatory hype in recent years about the emergence of nonprofit news media that cover local, state and national news.

The implication often is that calling a news site “nonprofit” guarantees the quality, accuracy and fairness of its content.

Who’s behind nonprofit news sites?

A new report by the Project for Excellence in Journalism at the Pew Research Center offers a sober and much-needed look at exactly what those nonprofit news sites actually produce, how they operate, and who is behind them.

A lot of the 39 nonprofit news sites Pew studied are “clearly ideological or partisan in nature,” the report says.

And sites with more ideological content, it says, “tend to have fewer funders and revenue streams, are less transparent about their mission and funding, and produce less content than sites with more ideologically balanced coverage.”

The least ideological sites, in comparison, “operated entirely on their own and had multiple funding sources and revenue streams.”

And while some sites “may have been forthcoming about who their funders were,” the report says, “often the funders themselves were much less clear about their own sources of income,” an approach that “effectively made the first level of transparency incomplete and shielded the actual financing behind the news site.”

At traditional newspapers, by contrast, it was clear that advertisers and subscribers picked up the tab.

The Pew report says reporting resources for nonprofit news sites tended to be limited, most news stories “presented a narrow range of perspectives on the topics covered,” and those topics “often correlated with the political orientation of the sites and their backers.”

The fact that a news site is nonprofit, the report says, “does not define what kind of news it produces.”

The hypocritical or ironic icing on the cake: Many nonprofit news sites, Pew says, “purport that they were started precisely to fill the gap left at the state level from cutbacks in traditional media, especially newspapers, and thus present themselves as functioning much as traditional media once did.”

How can we assess news sites?

When they worked for newspapers, many if not most reporters and editors failed abysmally to report on the nonprofit world, and often were clueless about it and the fundamental role it plays in society.

Yet some of those journalists suddenly have discovered philanthropy as a possible source of sustenance now that they are out of work, looking for jobs and discovering or creating nonprofit news sites.

For their part, foundations traditionally did a terrible job of communicating with the news media, and often held newspapers in contempt.

Yet some of those foundations are investing in nonprofit news sites that preach the importance of local and state news but practice little more than partisan propaganda.

Nonprofit status, in short, often may be little more than an opportunistic and seductive gimmick that old-media journalists and partisan advocates use to secure support from philanthropies that are smitten with the idea of nonprofit news sites yet less than critical about the ability of the people running the sites to manage their nonprofits effectively.

The bottom line: Labeling itself as “nonprofit” does not guarantee the quality or integrity of a news site.

It also can be a misleading strategy for attracting readers and philanthropic investors.

So in the brave new world of "nonprofit" news sites, the tried-and-true principle remains: "Buyer, beware."

August 1, 2011

Debt crisis a crossroads for nonprofits

The “new normal” prophesied for the charitable marketplace in the wake of the implosion of the U.S. economy nearly three years ago merely hinted at the pain nonprofits and philanthropy can expect, along with the fundamental changes they will need to make, as a result of the U.S. debt crisis.

Nonprofits and philanthropy still are running on the creaky frame of the charitable business model designed a century ago and tweaked in the past decade or so through hands-on venture philanthropy and nonprofits’ retooling their operations to meet funders’ growing demand for metrics, accountability and impact.

While the economic collapse in 2008 sounded alarms about structural flaws in the way nonprofits and philanthropy operate, the debt crisis, while temporarily averted, reflects congenital economic and social problems and should trigger fear and trembling among nonprofits and their supporters, opening their eyes to the need to reinvent the way they work.

As an integral part of a global marketplace transformed by technology and by sweeping changes in the structure and movement of capital and labor, the U.S. economy and workforce are undergoing radical upheaval.

That up-ending of our marketplace and culture will put enormous pressure on nonprofits to overhaul the way they operate as businesses and serve clients and donors.

And that will require that they focus on how best to learn, lead and grow, taking a brutally honest look at their own organizations, adapting to a marketplace in which change is continual, rapid, overwhelming and unsettling.

So they need to focus on what really matters, and step away from whatever diverts them from their mission.

Philanthropy is about community, and nonprofits are in business serve people and places in need.

To be effective in their job of healing, repairing and improving their communities, nonprofits must create a culture of philanthropy that engages their employees, boards, donors, volunteers and partners in the vision of making their communities better places to live and work.

So a nonprofit truly must know its community and itself, and must work continually to work with its internal and external “family” to improve its programs, operations and support.

A nonprofit must know and build on its strengths, and recognize and address its weaknesses.

A nonprofit must know its supporters and help them understand critical community problems and see how investing their time, money and know-how will help fix those problems.

A nonprofit also must recognize that its employees are people, not interchangeable parts, and represent a core organizational asset as valuable and worthy of attention, investment and cultivation as are donors.

So nonprofits must create a business model that values employees’ contribution, invests in their professional development, can adapt to their need for flexibility in balancing work and life in a complicated and often-unpredictable marketplace, and can help them see how the purpose of their work is to address community problems that affect the lives not only of the organization’s clients, but those of employees as well.

Talk about change and leadership is cheap, and it flows freely among nonprofit consultants and “experts.”

But generating change and providing leadership are complex, ongoing jobs, and any nonprofit that wants to better serve its community first must be willing to change the way it does business.

If nonprofits truly want to fulfill their mission, they need to treat the debt crisis and the firestorm it will unleash in our economy and culture as an opportunity to get their own shops in order so they can help our communities climb out of the seemingly bottomless hole America has dug for itself.

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